ANTITAKEOVER CHARTER AMENDMENTS: EFFECTS ON CORPORATE DECISIONS

William N. Pugh, Daniel E. Page and John S. Jahera

Journal of Financial Research, 1992, vol. 15, issue 1, 57-67

Abstract: In recent years many shareholders have voted to amend their corporate charters to decrease the likelihood of a hostile takeover. Critics of antitakeover amendments argue that by sheltering management from the market for corporate control, management may become entrenched and be less likely to act in the best interest of shareholders. The counter argument holds that the threat of a hostile takeover and possible job loss may move management toward “short‐sighted” decision making. In this study we test the hypothesis that, upon passage of antitakover amendments, managers adopt a longer‐term view with respect to capital expenditures and research and development. Empirical results support the hypothesis, as both capital expenditures and research development display significant increases relative to the year of enactment.

Date: 1992
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